15% top-line growth possible; eyes on PPAs from AP, TN: NCC

YD Murthy, executive VP - finance, Nagarjuna Construction Co explains to CNBC-TV18 that the company plans to post a top-line growth of 15% amidst improvement in debt-collection and participating in bids for PPAs from Andhra Pradesh, Tamil Nadu and Karnataka.

Below is an edited transcript of the interview on CNBC-TV18.

Q: At last there is a a bit of relief in the stock markets. Do you plan to sell stakes in any of your BoT projects or real estate assets?

A: We have observed that there is an improvement in the macro-economic environment to which the share prices in the market are responding to positively. Interest rates are expected to come down and payment cycles are improving.

We believe that as we go forward our order-book will also improve. As far as the progress in asset- monetisation is concerned, I cannot say anything at this point in time. The progress will be evident only over a period of time.

Q: Is it at an advanced stage? Are you beginning to talk with interested parties? Can we expect a deal in the next two or three months? How close are you to a deal?

A: We have managed to get some terms-sheets signed regarding some of our assets. The process of due diligence is on. We plan to be able to finalise some these definitive agreements, all in respect of each of these SPVs. Subject to due diligence and other processes, the money should flow into the company by March 2013.

Q: The market's perhaps other concerns include the significant slowdown in the collection of receivables which could hamper execution. What is your perspective on this? Have receivables picked up? Are you facing any pressure on execution at this point of time?

A: From a debt-collection period as long as 120 days in September 2011, we have brough it down to, in the June 2012 quarter, around 89 days. The period of 80-90 days is the industry norm.This improvement will unlock substantial working capital which will give us enough elbow room to continue with our plans.

Our only wish is that this improvement in debt-collection continues for the rest of the year. If that happens, it will help us unlock lot of working capital and help repay some of our loans.

Q: How is your revenue growth? What is your guidance on the full-year revenues? What will the FY14 revenues look like?

A: In the first quarter, we reported a top-line growth of 28% which is very positive from our point of view. We believe the businesses are cyclical in nature and currently we are at the bottom of that cycle. We estimate that from this year onwards, things will start improving.

The fiscal year of March 2012 was difficult, but from this year onwards we will definitely be able to report good growth in the top-line as well as in the bottom-line. As far as the current year is concerned, we have not given any guidance. But a 10-15 percent growth top-line is definitely possible.

Q: Last quarter your order inflow is about Rs 2,000 crore. What has it been this time around?

A: The data for this quarter is yet to come in. But I think it is around Rs 1,200-1,500 crore.

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Q: You mentioned your foray into the power front especially with the acquisition of coal mines. Do you have there any BoT project that starts revenue generation in the current year or FY14?

A: Let me update you about our 1320 MW power project at Krishnapatnam. We declared financial closure and have drawn the first tranche of debt from our lenders and commenced work.

Our coal mine in Indonesia is being developed. It's a greenfield mine in which we own a 50-percent stake and plan to continue to invest considerably. Our aim is to start production of coal in tandem with commencement of generation of power at the plant.

We have five BoT-owned projects and all of them are operational and generating revenues. We have acquired the 100MW Himachal Sorang project which is likely to commence commercial operation in the next three to four months.

Q: Any clarity on the FSA for Krishnapatnam?

A: We got the letter assuring linkage. We are trying to convert them into FSAs.

Q: So you expect it to happen over the next quarter, by December?

A: Yes, it should happen by then.

Q: To what extent will the FSA cover 80 percent of your coal requirements?

A: The FSA - the linkage letter - covers about 70 percent of the requirement of coal for the power project. The balance 30% will have to be imported.

Q: What about PPAs? Who is buying your power?

A: We have submitted our PPA bids for Andhra Pradesh and have been shortlisted for projects of about 500 MW and are likely to sign the PPA with the Andhra Pradesh government. We are also participating in bids in other states, notably Tamil Nadu and Karnataka.

Q: At the moment can you detect how much margins you will make on that project?

A: The power project is expected to have an equity IRR of about 18-20 percent.